Be Smarter in 2011

The following is an interview with investing maven Carl Richards, aka "the napkin guy", renowned for his weekly sketches on the NY Times Bucks Blog and now a DailyWorth contributor.

We all have a tendency to make the same mistakes over and over again, particularly when it comes to money and investing.

The trouble with money is that you're often not aware of the repeating patterns. So as you look back on 2010, pause, and reflect on those if you're going to make real changes in 2011.

Ask yourself: What are the money-related habits I fell into—obsessive research, worry, stress, monkey-brain chatter—that had absolutely no value, and in fact were detrimental to my overall finances?

Take investing. In most areas of your life, the more research and skill you can bring to an exercise, the more successful you'll be.

When it comes to investing, success is much more about behavior than it is about skill or knowledge.

Many people want to know that if a mutual fund has X, Y, and Z variables, that it will do better than all the others.

In fact, you never know how a mutual fund is going to perform until... it's over.

The only variable you can isolate is cost—and there's a negative correlation. The higher the cost of your investments, the lower your return. Or rather: the lower your costs, the higher your return.

So that's one key place to start in 2011. Just because you can't pick the "right" fund doesn't mean you're dumb. Most people are smart enough to get a good return over time—if they change their behavior and stop chasing the next big thing.

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